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How Does Amazon Dropshipping Work? A No-Nonsense Guide

Dropshipping on Amazon and eBay: Evaluating Sales Channels

It’s obvious an entrepreneur would want to try Amazon dropshipping. In 2019, the company had over 300 million active users and more than $280 billion in sales—using Amazon as a sales channel for your business can mean big returns. 

But how does dropshipping on Amazon work? And how can you turn it into a profitable venture for your ecommerce business?

This guide will walk you through whether dropshipping on Amazon can be profitable, how to dropship on Amazon, and top dropshipping tools to help you start selling today. 

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Does Amazon allow dropshipping?

Yes, Amazon lets you dropship on the marketplace as long as you follow a few housekeeping rules:

  • Always be the seller of record for products.
  • Identify yourself as the seller on packing slips, invoices, and other information in connection with products.
  • Remove all information that identifies the third-party seller before shipping the order, including invoices, external packaging, packing slips, etc. 
  • Stay responsible for accepting and processing returns.
  • Follow all terms of your seller agreement and Amazon policies.

Read more about Amazon’s dropshipping policy.

How much does it cost to dropship on Amazon?

Amazon dropshipping fees vary by product type but are usually in the 10% to 15% range. If you’re working with relatively small dropshipping margins, this will take a hefty chunk out of your profits.

You’ll also have to choose a selling plan. The Individual plan costs $.99 per unit sold, and the Professional plan costs $39.99 per month, no matter how many products you sell. 

Read more about Amazon’s commission fees

Is Amazon dropshipping profitable?

Amazon dropshipping can be profitable. The average dropshipping margin is between 10% to 30% margins. Amazon takes around 15% off your top line revenue. 

So if your margins are around 30%, that means you’ll have a new margin of 15% after selling a product on Amazon. These margins can be higher if you win the Amazon Buy Box, but it’s highly competitive and shouldn’t be something you rely on long term.

Pros and cons of being an Amazon dropshipper

Pros

The advantages of selling on Amazon are similar to the benefits of eBay—it’s easy to get started, you have immediate access to a large audience, and you don’t need to worry about marketing or SEO:

Vetted dropshipping suppliers. Amazon buys products in bulk from mostly European suppliers. It then holds everything in warehouses until it’s ready to ship. Whether you’re a new seller or seasoned pro, you can sell quality products at scale to an international audience.

Zero warehouse cost. Amazon also offers its own fulfillment centers, known as Fulfillment by Amazon, which allow you to complement your dropshipped items with products of your own without having to deal with packing, shipping or warehousing.

More opportunities for discoverability. Amazon also has over 30 categories you can choose from. You can sell in as many different dropshipping niches as you want, which with the right dropshipping suppliers and products can help you reach super-targeted markets.

Cons

Exposure of sales data. One risk you take using Amazon’s platform is that Amazon can see all of your sales data, from the items that sell best to how much you’re selling overall. Amazon has been accused of using this data to identify great selling opportunities and strengthen its own involvement in the niche, ultimately pushing out other merchants selling through its marketplace.

Less long-term connections with customers. It’s unlikely that you’ll be able to grow a long-term relationship with your customers. Amazon is more geared towards helping businesses sell products than building customer relationships. Be prepared to be severely restricted on how you can brand your business, display your products, and communicate with your customers.

No customization. You’re going to be really limited in terms of customization. Everything you do in terms of branding, UI, marketing, and everything else is under Amazon’s control.

Upfront investment. To meet Amazon’s fulfillment requirements, you’ll want to have products from the supplier in your inventory. This means you’ll need to invest money upfront in order to start dropshipping on Amazon.

How to start dropshipping on Amazon in 6 steps

1. Choose an ecommerce platform 

Thanks to the Shopify and Amazon partnership, you can now sell on the world’s largest marketplace conveniently through Shopify. You can use the Amazon sales channel to track products and orders, plus: 

  • Create listings for new products on Amazon
  • Create and manage offers for existing products on Amazon
  • Link Amazon listings to your Shopify admin

Shopify store

If you don’t have a Shopify store yet, sign up for a 14-day free trial and start dropshipping on Amazon today. 

2. Get an Amazon seller account

To sell on Amazon, you’ll need to create an Amazon seller account. Head over to sellercentral.amazon.com to sign up. You’ll be asked for details about your business, such as address and tax information, as well as other identity and credit card information. 

Sign up for Amazon seller account

3. Get approved in your product category (if necessary)

Amazon requires sellers to get approval for certain products types. Fashion, grocery, music, and jewelry are popular categories that require approval before setting up your Amazon store. Read the overview of product categories you can sell in.

Product category approval

4. Connect your Amazon account to Shopify

Once you create an Amazon account and get approved, connect your Amazon store to Shopify. On the left sidebar in your Shopify admin, click the + button next to Sales Channels.

Shopify dashboard connecting to Amazon

A pop-up menu will appear. Find Amazon and click the + box.

Connecting Shopify to Amazon

View details for any section you want more information about. Then continue to click Update sales channel. 

connecting amazon to shopify 2

5. Create an Amazon product listing

Your dropshipping products don’t automatically list on Amazon after you add the Amazon sales channel. To manage your Amazon listings with Shopify, you have three options:

  1. Link Shopify to your current Amazon listings
  2. Create an offer for a product you already sell on Amazon
  3. Create a new listing for a new product on Amazon

If you’re starting out fresh, be sure to find high-demand, low-competition products in Oberlo (which sources products from AliExpress) to sell. You can import products directly from Oberlo to Shopify, then show those listings on Amazon. 

Oberlo dash

Note: If you’re new to Amazon, you may not be able to list all your products right away. Amazon limits the number of new ASINs you can create each week until you sell more on the platform.

6. Sync inventory with the Amazon sales channel

Shopify can automatically update the Amazon listing to match your product’s inventory in the Shopify admin. Use the inventory tracking settings you set for each product variant to sync your inventory on Amazon. You can change it on the product detail page in Shopify. 

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Dropshipping from Amazon to eBay

An older dropshipping model that’s still around is dropshipping cheap products from Amazon FBA to buyers on eBay. While it’s legal, it’s generally frowned upon by platforms and even buyers—and you only walk away with a thin margin of profit. 

Think about it from a customer’s perspective: you purchase the latest grooming brush for your dog on eBay for $20. You wait a week, you’re excited. Then when FedEx knocks on the door, your brush shows up in an Amazon box. 

Curious, you go on Amazon and find the product for a few bucks cheaper than you bought it for. How would that make you feel about the business you bought from? Don’t expect a repeat purchase in this scenario. 

The model increases profits for the dropshipper, but no one else wins here. EBay doesn’t support the Amazon-to-eBay-arbitrage business model either, allegedly banning hundreds of Israeli companies for it in 2017. 

In short, if you want to build an honest and transparent dropshipping business, steer clear of dropshipping from Amazon to eBay.

Top Amazon dropshipping software

Explore this list of tools that will help you get started with Amazon dropshipping:

  1. Amazon channel app. This free Shopify app helps you manage your Amazon inventory and fulfill Amazon orders from your Shopify admin. You can easily create Amazon listings for your Shopify products, track inventory, and monitor sales using your Sales Overview and Analytics pages. This way you never have to leave Shopify to sell in multiple marketplaces.
  2. Merchant Words. You can use this software to check search volume and data for keywords. Paid plans start at $29.99 per month. 
  3. Sellery. This real-time Amazon repricing software helps you create repricing strategies to win the Buy Box and increase sales and profits automatically. You can use the trial version for free. Then continue onto a paid plan, which works out to 1% of your gross monthly sales. Minimum starts at $50 per month. 
  4. FeedCheck. FeedCheck helps you monitor and respond to customer reviews to build connections with customers across all your sales channels. You can quickly access Amazon reviews and provide better customer service for people. Plus, it lets you monitor competitors’ product reviews and questions so you can analyze and improve your own products.
  5. Seller.Tools. This app helps automate your Amazon dropshipping store. You can access a robust keyword manager, PPC management tool, product research tools, and marketing automation tools built using ManyChat. You can download Messenger marketing workflows for rebate distribution, promotion counters, automated review captures, and more to grow your Amazon business fast. 

Running a dropshipping business with your own online store

The alternative to selling through third-party sites like Amazon and eBay is to start an online store in order to sell products. This is the method that attracts most people interested in building a successful dropshipping business. 

Pros

More control. With your own online store you get to create a shopping environment that’s conducive to selling your products and, most importantly, adding value to your customers. You can customize the look and layout and create custom product pages optimized to best inform your customers about the products.

Easy design. Building your own ecommerce store is easy, especially with platforms like Shopify. Simply choose a store design out of hundreds of options, make any customizations you want, add your products, and hook up a payment gateway and you’re up and running. Depending on the type of online store you’re looking to create, you potentially can do all of this in one day.

Mobile ready. Selling on eBay and Amazon via mobile can be a pain. If you choose to build your online store with a well-respected hosted ecommerce platform your site will likely be responsive, which means it will look great on an iPad or mobile phone. This is increasingly important these days, as nearly 30% of online purchases are made via a mobile device.

Some online store platforms, like Shopify, let you manage your entire business from your mobile device. This is particularly attractive to dropshipping business owners who often like to run their business on the goor even on the beach somewhere.

No third-party fees. You won't have to pay 10% to 15% of every sale to eBay or Amazon, which will significantly improve your profit margins. All in all, you’re going to make more money by starting your dropshipping business with an online store.

More dropship supplier options. When you run a dropshipping business on your own, you can build relationships with different wholesalers through sites like AliExpress, AliBaba, and Oberlo. If you’re concerned about long shipping times, you can find vendors who use ePacket shipping to speed up the shipping process and get your products to customers faster. 

Building a real business. You’re able to build a long-term business with a distinctive feel, known expertise, and repeat customers. Most importantly, you’ll be building a business with equity. It’s much easier to sell a business built around an independently owned website.

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Cons

Less free traffic. With your own site, you’ll be responsible for generating traffic through marketing, social media, SEO, and paid advertising. There’s more cost involved, either money or time invested, and you’ll need to be willing to invest in a long-term campaign to promote your new store.

Grow your online business today with Shopify

Amazon dropshipping can be a great way to increase sales for your business, whether you’re a newbie or veteran. If you choose to include this dropshipping method in your Shopify store, we have all the tools to help you with dropshipping fulfillment, sourcing, pricing, and marketing—be sure to check out our top dropshipping tips, too. This way, you can become a more profitable online retailer and create the life you’ve always wanted.


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